Personal Finance Chapter 18 Quiz

Questions and Answers

The return that a person gets on a certificate of deposit is usually less than the return on a money market account.

False

Consumers have the right to have problems corrected and receive payment for false claims and poorly made goods.

True

Banks and credit card companies check a person's financial history before deciding whether or not to offer credit to that person.

True

The Better Business Bureau issues warranties on products that consumers buy.

False Signup and view all the answers

U.S. government bonds are very safe investments.

True Signup and view all the answers

What is the money that a person has after paying taxes known as?

disposable income Signup and view all the answers

How does a warranty protect a consumer?

It promises to replace or repair a faulty product. Signup and view all the answers

What makes you more likely to buy on an impulse?

credit Signup and view all the answers

What U.S. president proposed that consumer rights be recognized?

John F. Kennedy Signup and view all the answers

What are the three basic parts of a budget?

income, expenses, and balance Signup and view all the answers

What type of person is most likely to have a budget deficit?

Someone who spends more than they earn Signup and view all the answers

What is a benefit of credit?

You can pay later Signup and view all the answers

The most common source of credit today is a?

Credit card Signup and view all the answers

What savings plan is most likely to have the highest rate of return?

stocks Signup and view all the answers

One disadvantage of a certificate of deposit is that?

You cannot make early withdrawal Signup and view all the answers

When a person buys a share of stock, that person is?

Becoming part owner of the company Signup and view all the answers

What is the financial tool that automatically deducts money from your bank account when you make a purchase with it?

debit card Signup and view all the answers

What type of savings pays high interest and allows you to write checks against deposited money?

money market account Signup and view all the answers

The amount you initially deposit into an account is the?

principal Signup and view all the answers

Give one step to make a budget.

Record everything and it's sore Signup and view all the answers

What is meant by expenses?

money spent on goods and services Signup and view all the answers

What is income?

The money you earn or any other money received Signup and view all the answers

What is collateral?

property or other valuable items that a borrower pledges as security for a loan Signup and view all the answers

What does it mean to charge?

To pay by using a credit card Signup and view all the answers

What is surplus?

A situation in which the amount of a good or service supplied by producers is greater than the amount demanded by consumers Signup and view all the answers

What is risk in financial terms?

The lack of a guarantee that you will make money or keep your entire principal Signup and view all the answers

What is a mutual fund?

An investment company that sells stock in itself and uses the proceeds to buy stocks and bonds issued by other companies Signup and view all the answers

What is a debit card?

Something that when you make a purchase, the money comes directly from your checking account Signup and view all the answers

What is a time deposit?

An agreement to deposit a certain amount of money for a certain amount of time Signup and view all the answers

What does it mean to save?

To avoid the need to use up or spend money Signup and view all the answers

Name five consumer responsibilities.

Seek help when necessary, use advertising carefully, make fair complaints, comparison-shop, look at brand-name and generic products Signup and view all the answers

Study Notes

Financial Concepts and Definitions

Returns on a certificate of deposit are generally lower than those on a money market account. (False)
Consumers are entitled to have issues resolved and compensation for misrepresented products and poor-quality goods. (True)
Banks and credit card companies evaluate an individual's financial history when deciding on credit extensions. (True)
The Better Business Bureau does not issue warranties on purchased products. (False)
U.S. government bonds are considered very safe investments. (True)
Disposable income refers to the money remaining after tax obligations.

Consumer Protections and Rights

Warranties assure consumers that faulty products will be repaired or replaced.
Credit can increase the likelihood of impulse purchases.
John F. Kennedy was the U.S. president who advocated for the recognition of consumer rights.

Budgeting Basics

A budget consists of three fundamental parts: income, expenses, and balance.
A budget deficit occurs when expenditures exceed income, indicative of overspending.
Benefits of credit include the ability to pay for products or services at a later date.

Credit and Savings

Credit cards are the most prevalent form of credit today.
Stocks generally provide the highest potential rate of return among savings options.
A certificate of deposit has the disadvantage of not allowing early withdrawals.
Purchasing stock makes the buyer a part-owner of the respective company.

Banking and Transactions

Debit cards deduct funds directly from a checking account upon purchase.
A money market account offers high-interest rates and allows check-writing against deposited funds.
The initial amount deposited in an account is known as the principal.

Financial Management Strategies

Budgeting steps include recording all earnings and expenditures meticulously.
Expenses refer to money spent on goods and services, while income encompasses all earned or received money.
Collateral is the property pledged as security for a loan.
Charging refers to making payments with a credit card.

Market Dynamics

Surplus occurs when the supply of a good or service exceeds consumer demand.
Risk in investments represents uncertainty regarding profit or loss and the potential threat to the principal amount.

Investment Vehicles

A mutual fund is an investment firm that sells shares and uses the funds to purchase stocks and bonds from other companies.

Saving Practices

Saving involves preventing excessive spending or usage of available funds.

Consumer Responsibilities

Key consumer responsibilities include seeking assistance when needed, evaluating advertising critically, making justified complaints, comparison-shopping, and considering both brand-name and generic products.

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Description

Test your knowledge on the key concepts of Chapter 18 in Personal Finance. This quiz covers consumer rights, banking relationships, and investment returns. Challenge yourself to differentiate between true and false statements regarding financial products.